Fannie Mae and Freddie Mac set a dollar value, called the “conforming loan limit,” to define the home loan sizes that they will guarantee. A Jumbo Mortgage exceeds this dollar value and, as the name implies, it is typically used to purchase a “luxury home” that exceeds the value of the average home in the area. Because the borrower is asking for a larger loan amount, the interest rate on a Jumbo Mortgage is usually higher.